Govt’s underlying budget deficit better than forecast

Jan. 25 (BusinessDesk) – A month after
releasing new budget forecasts, the New Zealand government
is tracking above them.

The government posted an operating
deficit before gains and losses (obegal) of $3.025 billion
in the five months ended November 30, which was $203 million
better than the $3.228 billion deficit forecast in the
half-year economic and fiscal update released on December
18.

The government is trying to get its books back in the
black in the 2014/15 financial year after taking serious
hits from the global financial crisis and Christchurch
earthquakes. In the update just before Christmas, Treasury
forecast an obegal surplus of just $66 million in the
2014/15 financial year, down from the $197 million buffer
flagged in the May budget.

In the accounts for the five
months to November 30 released today, core Crown spending
was 0.1 percent above forecast at $28.8 billion, and core
tax revenue of $22.5 billion was $127 million, or 0.6
percent, higher than forecast.

Net gains recorded by the
New Zealand Superannuation Fund and Accident Compensation
Corp, pushed the operating balance to a $706 million
surplus, a $1.2 billion turnaround on the forecast deficit
of $515 million.

Net debt of $56.4 billion was $317
million below forecast and is equal to 27.1 percent of gross
domestic product.

The government's ambitious plan to
return to surplus in the 2014/15 fiscal year hasn't
convinced many, with the Reserve Bank, Fitch Ratings and a
survey of financial institutions picking the books to stay
in deficit for at least another year.

The Treasury is
forecasting an obegal deficit of $9.2 billion in the 2011/12
year, falling to $7.3 billion and $2 billion in the
following two years before turning into
surpluses.

“It’s important that the government sticks
to its programme of responsible fiscal management, so we can
get back to surplus and start repaying debt,” Finance
Minister Bill English said.

“At the same time, we will
remain focused on building a more competitive and productive
economy that encourages investment and supports jobs and
higher incomes.

“That will be the focus of Budget 2013
later in the year,” English
said.

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